While others feel that the rise in housing loan limit may lead to price escalation and may not solve the real problem of supply of affordable homes.
In a boost to affordable housing under the Pradhan Mantri Awas Yojana (PMAY), the Reserve Bank of India on Wednesday raised the housing loan limits under priority sector lending (PSL) for economically weaker sections and lower income groups. Analysts said the RBI move, in convergence with the government’s schemes for affordable housing, will help aspiring home buyers, as with the raised PSL limit, banks will tend to lend more for low-cost housing.
Home loans up to Rs 35 lakh in metros (with population of 10 lakh and above) will now qualify for the benefits of priority sector lending, against up to Rs 28 lakh earlier. Similarly, loans up to Rs 25 lakh will now qualify under PSL for other centres, compared with Rs 20 lakh earlier. However, the house cannot cost more than Rs 45 lakh in metros and Rs 30 lakh in other centres.
In a parallel, the CCEA on Wednesday allowed the use of land parcels with sick/closing PSUs to build affordable houses. Under the Pradhan Mantri Awas Yojana, people from weaker sections get loans up to Rs 6 lakh for up to 20 years and the total amount of the dole out is capped at Rs 2.67 lakh. Beyond this limit or without subsidy, the interest rate is currently around 8.65% in some banks. The central bank will issue a circular in this regard on June 30.
“Big boost to Housing for all. Increase in home loan limits under Priority sector lending to Rs 35 lakh in cities & Rs 25 lakh elsewhere to make such bank loans cheaper,” financial services secretary Rajiv Kumar tweeted. The outlay for PMAY-Urban saw a 520% annual increase in FY19 to Rs 31,500 crore (including Rs 25,000 crore as extra-budgetary resources). The outlay for PMAY-Rural for the current financial year is Rs 33,000 crore.
Under the PMAY, the government is aiming to build 3 crore houses in rural areas and 1 crore in urban centres. More than 47 lakh houses have already been sanctioned in urban areas and more than one crore in rural areas. “This would give a boost to affordable housing real estate sector and help in economic growth,” Khushru Jijina, MD of Piramal Finance & Piramal Housing Finance, said. According to RBI data, deployment of gross bank credit in priority sector housing sector increased 1.2% year-on-year in April 2018 to Rs 3,66,700 crore.
Under the PMAY-Urban Credit Linked Subsidy Scheme, the National Housing Bank has disbursed Rs 3,018 crore against 140,943 units. Under the EWS/LIG scheme, it has disbursed Rs 2,436 crore against 113,081 units and under the MIG scheme, Rs 582 crore has been disbursed against 27,862 units. Some market players do not see much of an impact of the increase in housing loan limits. “The increase in the PSL helps to get access to the higher ticket-sized home although we operate in a bracket of between Rs 17 lakh and Rs 30 lakh. I wouldn’t say that the increase in the PSL limits makes any real impact on the true affordable segment, really,” Ram Walase, MD & CEO of VBHC, said.
While others feel that the rise in housing loan limit may lead to price escalation and may not solve the real problem of supply of affordable homes. “I would have been happier if the government had said project finance to projects constructing Rs 10-20 lakh homes are now PSL which will actually improve supply. Today, there are many smaller developers wanting to create these homes. Capital is one of the key missing ingredients for such developers, with bankers quite happy lending to the big branded developers.
Smaller developers wanting to produce true affordable homes need much smaller loans of up to Rs 10 crore. It is a capital starved sector with banks not really lending for projects. The only way you can get banks to step up and lend to a true affordable housing project in the Rs 10-20 lakh segment is by calling it PSL. The move today is actually counter productive because now there is going to be a glut of housing loans in the Rs 45 lakh segment,” Brick Eagle Founder Rajesh Krishnan said. Meanwhile, the central bank also observed that the level bad loans for the ticket size of up to Rs 2 lakh has been high and is rising briskly.